Slideshow

The 10 Best and Worst Bank Deals of 2011

GOOD DEAL: Babb's Nervy Move Was Worth the Risk

Valuable things are not cheap. That's our view of Comerica Inc.'s purchase of Sterling Bancshares Inc. in Houston, which investors hated. Yes, Comerica Chairman and CEO Ralph Babb agreed to pay more than twice the value of Sterling's tangible book at a time when most banks are changing hands at little or no premium to book. Yet Comerica now has twice as many branches in Houston and a new toe-hold in San Antonio, and it can sell treasury and wealth management services to Sterling customers. The deal was good for banking in 2011 in general, by giving healthy players like People's United, Brookline Bancorp, Valley National Bancorp and F.N.B. Corp. permission to look long and pay up, investors be damned.

BAD DEAL: Regions Struggles to Sell Morgan Keegan

Desperation stinks  especially as a sales tactic. Grayson Hall of Regions Financial Corp. is still very publicly looking for a buyer for Morgan Keegan & Co. The chief executive of the Birmingham, Ala., lender said in June that it would explore selling the brokerage. The timing could not have been worse: A late-summer crash in stocks sent bank M&A into its deepest drought in years. MF Global Holdings Ltd. collapsed. Europe's debt-crisis deepened and the U.S. debt ceiling debate came to a head. Nobody wants to buy straightforward loan and deposit operations in that kind climate. An investment bank? Good luck with that.

GOOD DEAL: Pops, I Reeled In a Big One

What do big clean banks and spotted owls have in common? They're both impossible to find in Florida. For that reason, BB&T Corp.'s deal there in November was a major coup for the Winston-Salem, N.C. bank. Its $300 million agreement for only the good parts of BankAtlantic Bancorp's retail bank is an exceedingly clever transaction that could be enormously influential  provided legal challenges to its structure do not derail it. The deal would be a win for BB&T Chief Executive Kelly King, who is eager to bulk up in Florida because he believes the retirement-friendly state has great long-term growth prospects despite its overbuilding woes. The price  which represents the deposit premium  is a pittance for BB&T.

BAD DEAL: Others Would Like to Throw It Back

The very same BankAtlantic transaction has the potential to hurt a lot of people that lent money to banks after the economy collapsed. BankAtlantic wants to unload its 78-branch banking franchise minus some $600 million crummy loans and $330 million junior debt outstanding in the form of trust-preferred securities. BankAtlantic's Chairman and Chief Executive Alan Levan called it an "elegant solution," but at least two parties representing the bulk of BankAtlantic trust-preferred holders are crying foul and looking to derail the transaction. The hedge fund Hildene Capital Management LLC  which holds $237 million of BankAtlantic's outstanding debt  filed a lawsuit to block the deal in November. Wilmington Trust Corp.  acting as the trustee for separate holders of BankAtlantic trust-preferred debt  notified BankAtlantic that its deal with BB&T classified as a default of its loan agreements.

GOOD DEAL: Capital One Deals Worth Taking Heat Over

Capital One Financial Group Inc.'s back-to-back deals for HSBC Holdings PLC's U.S. credit cards and ING Group NV's online U.S. bank are a gutsy gamble that put a target on the McLean, Va. bank. Chest-beating politicians hate it. So do community bankers that blame super big banks for wrecking the economy  and reputation. Our view? They're jealous. We see the deals for what they are: a classic, bear-market grab by a bank that kept it together when the economy collapsed. (For precedents, see JPMorgan Chase & Co. & Washington Mutual/Bear Stearns circa 2008.) They are worth the lumps that Capital One executives, like Chief Executive Richard Fairbank and General Counsel John Finneran, have taken in public. These deals are strategically sound and sensibly structured. If you get a bunch of good new deposits, you need a bunch of new customers to lend them out to. More people are banking online  buying a big online bank makes sense. (Image: Bloomberg News)

Park National Corp., a $7.3 billion-asset company, agreed last month to sell the operations of its Vision Bank in Panama City, Fla., for $27.9 million to Home BancShares Inc. in Conway, Ark. Park National bought the bank for $171 million in early 2007. Ouch.

Meanwhile, Hampton Roads Bankshares Inc. in Norfolk, Va., said in June it was looking to sell 10 branches and its Gateway mortgage and insurance businesses to cut costs and focus on community banking in its core markets. It recently completed the sale of a branch to Blue Ridge Bankshares Inc. in Luray, Va.; ECB Bancorp in Englehard, N.C., agreed in July to buy seven of the branches and $195 million of deposits in North Carolina, and Bankers Insurance LLC of Richmond, Va., purchased Hampton Roads' Gateway Insurance Services Inc. (Image: ThinkStock)

GOOD DEAL: PNC Deal for RBC Was Textbook

PNC Financial Services Group Inc. proved to be a trailblazer in more ways than one this year.

This week the Federal Reserve Board approved the Pittsburgh bank's nearly $3.5 billion agreement to buy RBC Bank USA. The ex-Royal Bank of Canada unit will firmly plant PNC in the Southeast by adding more than 400 branches in six Southeastern states and $25 billion of assets. It complements two other PNC acquisitions --27 Flagstar Bancorp Inc. branches in metro Atlanta and 19 Tampa-area branches from BankAtlantic Bancorp Inc.

Besides being a good business deal, it was also low on the radar unlike deals this year by Capital One and First Niagara. No big public hearings were held in major cities that left the company open to criticism and bad headlines. Chief Executive James Rohr lived up to his word and won't have to sell stock to complete it.

Brookline Bancorp. Inc. is expected to close its acquisition of Bancorp Rhode Island Inc. by Jan. 1, but it wasn't pretty.

The $3.1 billion-asset Brookline, Mass., company said in April that it would pay $234 million in cash and stock for the $1.6 billion-asset Bancorp Rhode Island, which is based in Providence. Brookline extended a shareholder election deadline several times, until finally holding it in the past week. Brookline's new chief financial officer caused investors further anxiety when she delayed the release of third-quarter earnings by several weeks. The bank said it was waiting on Federal Reserve Board approval, which it received Dec. 8.

The uncertainty and bad headlines that the transaction stirred made it the poster child of a number of deals that were announced in the spring and lingered for months as regulators took their time and markets went haywire.